Paul Gavan (Sinn Fein) | Oireachtas source

The Minister of State is always welcome to the Seanad. On behalf of Sinn Féin, I welcome the Bill. The main reason for it is to remove the 50% portfolio cap under the Government's Covid-19 credit guarantee scheme. The removal of the cap is a welcome move by the Government. It negates a problem relating to the scheme whereby banks were refusing to lend to small businesses in dire need of affordable credit. This aspect of the scheme was a problem that Sinn Féin identified many months ago and outlined in a letter to the Ministers for Finance and Business, Enterprise and Innovation of 13 May. That letter stated that the design of the scheme was not fit for purpose and had resulted in negligible take-up from businesses and negligible loans issued from banks. The portfolio cap meant that banks saw it as unattractive to loan moneys to SMEs through the scheme. It also resulted in extremely high interest rates where banks did loan moneys. The removal of this cap should make it easier and more attractive for banks to lend to SMEs.

However, in addition to the removal of the caps, the Government should consider 90% to 100% State guaranteed loans with no repayments from businesses in the first 12 months, the State covering the cost of interest over that period and severely reduced interest rates thereafter. We believe that should be the case because of the depth of the crisis into which we are facing. Such measures would make the credit guarantee scheme much more attractive to business during this unprecedented and extremely difficult period.

There have been rumblings in the media that the Government will also follow up with changes to the scheme along the lines of what Sinn Féin has been suggesting, namely, no repayments for businesses over the first 12 months and the State covering the cost of interest over that period. The Government is also proposing low interest rates but we have not been told what "low" means. We have proposed capping interest rates at 2.5%, with a preference for interest rates to be much lower than that. The Minister of State might comment on that.

The removal of the portfolio cap by the Government shows it is willing to listen to economic proposals from Sinn Féin. I, therefore, ask the Government to go further and consider the full suite of measures laid down in our letter to the Minister for Finance of 13 May. I will briefly run through those proposals. Our scheme is called the back to business loan scheme. It is a €2 billion scheme that would have the following features: businesses would be able to borrow between €2,000 and €800,000, up to 25% of their annual turnover; zero interest with no repayments for the first 12 months; affordable rates of interest with no more than 2.5% applying after the first 12 months; no portfolio cap applied, with a 90% Government guarantee on loans; the level of guarantee to be reviewed each month with consideration given to the guarantee to 100% based on lending performance under the scheme; and no premium required to be paid for the cost of the guarantee.To be eligible under our scheme, businesses would have had to have suffered a 25% reduction in turnover as a result of Covid-19, to employ fewer than 250 people, and to have a turnover of €50 million or less. Those are our alternative proposals, which we believe would make the scheme much better.

I refer to the banks. One issue our party has been very clear on is that the banks should not benefit from this scheme. We do not believe they should defer any tax on profits. Every year, Sinn Féin seeks to amend the finance Bill to disallow banks from deferring tax on their profits. They especially should not be allowed to defer tax on a Government-backed loan scheme. Under previous schemes similar to the scheme before us, they have charged commercial interest rates to businesses even though the loans were backed by Government with negative borrowing rates from the European Central Bank. If the banks make profit under this scheme, they should pay tax on it and not be allowed to defer one cent.

The Minister of State, Deputy English, has agreed to meet with my colleague, Deputy O'Reilly, with regard to the interest rates charged, which is the real issue. The Government has said it has a commitment to ensure interest rates for loans under this scheme will be low. That is essential. The interest rates charged on loans under similar Government-backed schemes are subject to normal business loan rates from the respective banks with an additional 0.5% charge because of the Government guarantee.

Businesses themselves have pointed out the flaws in this scheme as have organisations such as Chartered Accountants Ireland. This organisation has highlighted first-hand reports of the problems businesses have had in accessing loans with interest rates as high as those under this scheme. In its document, "The Next Financial Year: Making Irish Business More Competitive", it states that the Covid-19 credit guarantee scheme is "too onerous and complex to administer and that the interest rates are prohibitive." It also states that interest rates charged for any Government-backed schemes "need to be closer to ECB rates than commercial interest rates."

Sinn Féin has called for similarly low interest rates for a number of months. We have been calling for interest rates to be capped at 2.5% and preferably for interest only to be applied at the level necessary to cover the overheads of administering the loans scheme. Low interest rates for this scheme will encourage SMEs to take up the available loans. We have heard that at first hand from businesses and their representatives. They have also said that it would be a significant incentive and help if the loans were to be given free of interest and if repayments did not have to be made for the first 12 months. I ask the Minister of State to consider the points we have made as he progresses the Bill further.